Structural Dividend Strength: How CGDV Protects Capital and Seeks Growth

Christopher Buchbinder: Finding Value Where Others Don’t

Portfolio manager Christopher Buchbinder often discovers opportunities where others don’t. This instinct has helped his fund – the Capital Group Dividend Value ETF (CGDV) – become one of the top-rated funds according to Morningstar.

He considers himself a contrarian investor, but not fanatically so – saying he’s fully willing to invest in stocks that others also like, if a good opportunity exists.

“My favorite investments are those where any educated person can open a newspaper or check their phone – as we often do today – and immediately find reasons not to invest in a company or sector. But our insight or analysis leads us to the opposite conclusion,” Buchbinder said in an interview with CNBC.

He is the lead manager of a five-member team managing this ETF, which launched in February 2022. However, he notes the strategy has existed for over two decades in different formats.

Capital Group Dividend Value ETF (CGDV) holds a five-star rating from Morningstar, which recently ranked it among the top dividend ETFs for 2025.

The fund aims to generate returns (before fees) that exceed the S&P 500 Index. Currently, the index yields 1.25%, while CGDV offers a 1.81% yield and an expense ratio of 0.33%. Approximately 90% of the fund must be invested in dividend-paying companies, and a similar percentage must have investment-grade credit ratings. The same share of the portfolio is focused on U.S. equities.

Defensive Mechanisms

“If you think about those constraints, they essentially direct us toward companies with higher built-in resilience,” says Buchbinder, a nearly 30-year veteran of Capital Research. “Investment-grade companies that pay dividends generally generate steady cash flow and are more resilient in market downturns.”

According to him, the ETF “almost always” outperforms the S&P 500 during weak markets – and also beats the Russell 1000 Value Index in most of those instances. CGDV participates in market upswings, though it lags behind during strong bull runs, he adds.

Despite that, the fund outperformed both peer ETFs and its benchmark index in 2023 and 2024, ranking in the 2nd and 8th percentiles, respectively, according to Morningstar. CGDV delivered nearly 29% return in 2023 and over 20% in 2024, and so far in 2025, it is up 5.4%.

Team-Based Approach and Stability

The management team includes specialists with diverse expertise and follows a thoroughly analytical approach. They’re supported by a wide network of analysts and a macroeconomic-focused team.

“This team model softens volatility and provides consistent results,” Buchbinder says. Since the strategy is long-term, if one manager underperforms, others can compensate.

“For investors with a long-term horizon – which we hope CGDV’s clients are – reducing volatility and providing a smoother ‘ride’ focused on long-term returns is to their full benefit. It also keeps them invested, which is crucial,” he emphasizes.

Three Areas with Potential

Buchbinder currently sees three main investment opportunities, including the healthcare sector.

Since the pandemic, this has been one of the weakest-performing sectors, he notes. The Health Care Select Sector SPDR Fund is down nearly 4% year-to-date and has a five-year annualized return of 7.3%, according to FactSet. For comparison, the S&P 500 delivered 14.2% annually over the same period.

“This triggers my contrarian mindset. When a sector with proven companies is out of focus for years, I become seriously interested,” says the Brown University graduate.

“Our analysts have identified a number of companies with promising drugs – either already on the market or in advanced development – where the market is clearly undervaluing their potential.”

Although he acknowledges short-term challenges, Buchbinder is confident in the sector’s 3-to-5-year outlook.

Two of CGDV’s largest holdings are in healthcare: Eli Lilly and UnitedHealth.

Top Holdings (as % of Net Assets)

The long-time portfolio manager is also bullish on the aerospace industry.

Although the sector has already seen significant recovery post-pandemic, Buchbinder believes the industry is in a long-term “supercycle.” RTX Corp and GE Aerospace are among CGDV’s top holdings, each comprising over 4% of the portfolio.

He explains that air travel has nearly returned to historical trends and continues to grow.

Additionally, he points out that gaps in aircraft orders, production, and spare parts supply that began during the pandemic are still not fully resolved.

“There’s a huge backlog in aircraft deliveries, and the world’s leading manufacturers have order books stretching seven to eight years that they cannot fulfill,” he says.

“Some of these companies also had operational issues, which they’re gradually resolving,” he adds. “We believe this is a sector with long-term tailwinds and improving company-level outlooks.”

Boeing, despite major reputational and operational issues tied to two 737 Max crashes, is also part of CGDV’s portfolio, making up 1.42% of its assets.

The company announced on Thursday that it will resume plane deliveries to China next month and increase production of the 737 Max. Last week, Boeing also reached a deal with the U.S. Department of Justice to avoid criminal prosecution over fraud charges related to the crashes.

Short-Term Shocks, Long-Term Opportunities

Christopher Buchbinder recently identified a new investment opportunity during the tech stock selloff driven by tariffs and geopolitical tensions. Despite his long-standing skepticism toward AI infrastructure hype – shaped by his experience as a Capital Group analyst during the dot-com bubble – he sees value in the current price drop:

“I usually reduce exposure to companies heavily involved in building AI infrastructure. But just like the internet, I believe that over the next five to ten years, AI will significantly change our lives.”

“And when the market starts to panic – not because of long-term issues, but due to short-term fears – it creates the kind of opportunities we’re looking for,” he adds.

Top AI Holdings:

• Microsoft – top position, ~6.4% of assets
• Broadcom – second-largest holding, ~5.6%
• Meta Platforms – also among leading holdings

The fund maintains a balanced approach between stability and participation in long-term innovation trends.